Ohioans with the lowest incomes already pay almost twice as much of their income in state and local taxes as the top 1%. Since 2005, state legislators have cut income and other taxes while increasing sales tax and other regressive taxes, resulting in an impressive average annual reduction of $50,000 for the top 1% earner. of $551,000 per year. Meanwhile, average state and local taxes for middle-income Ohioans showed a slight increase, and those with the lowest incomes paid an average of $164 more per year. The elimination of income tax would reinforce this trend. Ultimately, anyone who isn’t very wealthy will lose, either through regressive tax increases or cuts to basic shared services like education, or both.
Repealing the state income tax would also be fiscally irresponsible. This would threaten the state’s ability to meet the debt limit required by the Ohio Constitution, which states that we cannot spend more than 5% of general income taxes and net lottery proceeds on debt servicing. If we crossed this limit, it would compromise the state’s ability to issue debt to pay for school buildings and other capital projects.
State revenues rise and fall with the economy. Even before Huffman’s proposal, Fitch Ratings, a leading credit rating agency, warned that “major tax policy changes being considered or already enacted by U.S. states in response to a second year of exceptional income could have negative long-term credit implications. if current revenue growth is not sustained.
Ohio lawmakers have cut income taxes nearly in half since 2005, with little result. Our incomes are lagging, as are our economic output and job growth. And we expect them to continue to do so. That’s what Ohio’s budget director noted in his testimony last year. Between 2009 and 2019, the Institute on Taxation and Economic Policy found that states with the highest income tax rates performed as well or better on key measures of economic performance than those without income tax. generalized.
According to the United States Bureau of the Census, Ohio’s local and state taxes per person and as a percentage of income are lower than the national average.
Far from repealing our income tax, policymakers should raise it for those who can afford it the most — the wealthiest Ohioans — so we can fund our schools, cut tuition, return custody affordable children’s homes and expand broadband statewide. It’s the best way Ohio can prepare for the future.
Zach Schiller is research director for Policy Matters Ohio.